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Employing in Canada – Understanding Canadian Employment Law

By August 15, 2016October 17th, 2017No Comments
Employing in Canada Understanding Canadian Employment Law

Employing in Canada is no small undertaking for any foreign country, even for Canada’s cousin to the South – USA.  In this post, we are very excited to have Precision Global Consulting bring their expertise to help answer some the common questions we hear around the topic.


Precision Global Consulting is a US based workforce consultancy with over 15 years of experience helping companies place talent in the US and Canada whilst mitigating risk and ensuring compliance. David Bagheri, CEO of PGC, has driven PGC’s expansion in North America with a particular interest in Canada’s potential and has subsequently become an expert in employment-related matters within the nation.

He answers questions below with the regards to the challenges companies face when employing individuals in Canada.

  • What are some of the key differences between employing someone in the US and employing in Canada?

    • While there are many differences, below are some differences we identify as systematic variances:
      • Federal vs. Provincial
        • Unlike in the US where the Department of Labor is typically the driving force behind new employment regulations, in Canada, the provinces each have their own regulatory scheme that addresses employment regulations. The Federal government regulates workers in industries like banking, fishing, and telecommunications, as passes general employment equality laws. This can make compliance in Canada difficult, as each province will have different rules with regards to employment.
      • Paid Holidays and Paid Vacation Days
        • In Canada, most employees receive paid statutory holidays and vacation days. Employees that work on statutory holidays typically get paid their regular day’s rate plus time and a half premium pay for hours they actually worked. This can amount to as much as 2.5x of an employee’s regular rate if they work on a holiday. Most employees receive 2 weeks of paid vacation per year. Some provinces can increase to 3 weeks after a few years of employment. An employee making $50/hr as their regular rate can make as much as $125/hr if they work on a statutory paid holiday.
      • Classification & Overtime
        • An employee’s eligibility for overtime does not take into account the way they are paid, such as hourly or salaried, but rather relies solely on their position and industry. True managers and high technology professionals are frequently exempt from overtime, but the test varies for each province.
      • Termination Notice
        • In the US, employment is typically at-will. Employers can fire their employee for any reason and give no notice or severance pay. Although it varies by province, generally employees who have been employed for more than 3 months will receive 1-2 weeks of notice or pay in lieu of notice and this can increase the longer they are employed.
  • What are the top three compliance matters an international business should be aware of in Canada?

    • Employment Rights
      • There are two federal laws that address employment for all employees: The Canadian Human Rights Act (CHRA) which prohibits discrimination on the basis of gender, race, ethnicity, age, and some other grounds, and the Employment Equity Act (EEA) which regulate pay equality of four designated groups women, people with disabilities, Aboriginal people, and visible minorities. While the CHRA prohibits discrimination, the EEA places a burden on employers to institute measures that aid in the advancement of minority groups.
    • Living Out Allowance (aka Per Diem)
      • When paying employees with a per-diem for travel, you may be liable to pay taxes and penalties if the employee is paid improperly, wage withheld improperly, or the per diem is in excess of a reasonable rate. Unfortunately, the CRA has no specific “reasonable rate” structure for private company employees, so understanding the structure of the rates is important when defining how much to pay individual when they travel or stay away from their home residence for long periods of time.
    • Working with Subcontractors
      • While working directly with Corp2Corps in Canada avoiding employer burdens may seem advantageous to a balance sheet. The compliance aspect of ensuring that the Corps you pay are compliant with licensing, laws, and workers’ compensation adds additional levels of complexity.
  • What would a company have to do to employ someone in Canada?

    • The first thing would be to set up as an entity in Canada. However, there are only a handful of provinces that allow you to register your company if you have no owners/directors residing in Canada. For most international companies, this leaves a slim collection of provinces in which to set up. Most provinces also require you to have a physical office address in their jurisdiction. Which thus entails renting out office space and the associated costs. On the employment side, any licensing that your business may need is dependent on the province.
      • An easier method is to utilize the services of an employer of record/workforce management solution. In such case, the employer of record is set up in Canada and can employ individuals on the company’s behalf.
  • How do health benefits differentiate in Canada?

    • There is no Affordable Care Act equivalent in Canada. By law, employers do not have to offer private health care plans to their employees. The provinces administer their own government-funded health care program. So, a resident of a province will be able to receive health care without company involvement. However, to attract the best candidates, successful companies will generally offer supplemental coverages to their employees. These include other insurance options like life, auto, and illness.
  • What would you say are some of the most complex aspects of employment in Canada?

    • From experience, we have found it is very complex to properly administer vacation, holidays, and leave. Keeping a proper eye on the accrual rates and rules for each province is crucial in ensuring compliance. For example, while British Columbia has 10 paid statutory holidays, Nova Scotia only has 5. The differences amongst 13 provinces can become daunting. If improperly administered this can lead to significant penalties and back pay owed to employees.
  • What should international employers know about the work permit and visa process?

    • For an international employee to work in Canada, they must obtain a work permit and in some cases a visa. The immigration process in Canada has undergone a big change in the last few years. The process for temporary foreign workers became stricter in requiring a LMIA (Labor Market Impact Assessment). This required employers who are sponsoring a foreign workers visa to prove that they were not filling jobs which could otherwise be filled by Canadian citizens as well as making the process more expensive. U.S. and Mexico citizens have an easier process based on the NAFTA treaty between U.S., Mexico, and Canada. This process still requires an employee to apply for a work permit but bypass needing a visa or LMIA. Learn more about how to get a Canada business visa.
  • How difficult is it to import an expatriate into Canada? Are there strict regulations about skill-sets?

    • As with any country, there is an element of difficulty to bringing an expatriate into Canada. As mentioned above the LMIA process applies to most foreign workers and require specific skill sets and education levels. Under the TN process for an employee coming from the U.S. or Mexico, the employee must fall into one of a handful of specified professional job categories. Plus, they must have proof of past experience and education to obtain work authorization. The particulars about these requirements vary by industry. Canada does additional opportunities to foreign workers such as the working holiday visa (or International Experience Canada) available to individuals between the ages of 18-30 (in some cases 35) from a select list of countries who are looking to work in Canada for a short period of time for any employer or the Young Professionals visa which is similar to the working holiday visa but particular to a given employer.

Thank you again PGC for this piece, it is a great foundation for anyone looking at doing business in Canada. Read more about the top 5 benefits of opening operations in Canada.

Contact us today if you want to learn more about your employment options and global expansion strategy!